Schenker caught up in Chinese crackdown on NVOs

Even being part of the team helping China get ready for the Olympics is apparently not enough to shield companies from the Chinese government's regulatory crackdown on shipping intermediaries.

This week China's Ministry of Communications ordered Schenker China Ltd. to stop activity, saying that it did not qualify as a non-vessel-operating common carrier and had breached maritime transportation regulations. It also told international shipping agencies not to enter into contracts with the company and its branches for freight or accept cargo.

In June, China's Ministry of Communications twice warned liner carriers involved in the U.S.-China trade not to enter into rate agreements or accept cargoes from NVOs who had not registered. The ministry has threatened to follow through with significant penalties against liner carrier operators who fail to comply.

The regulation is part of China's Implementing Regulations that govern international maritime transportation with the United States, effective March 1, 2003, but it has not been enforced by the Chinese government until recently.

A Schenker spokesman said the charge against the company was apparently the result of a misunderstanding and had been resolved. He said apparently the company's name had somehow been dropped from a list of approved NVOs.

"Schenker AG is a registered NVOCC in China under a confirmed listing and is shown at the official Web site accordingly. In the past further branches have been registered under Schenker China Ltd. Unfortunately during the registration a discrepancy occurred and we are in contact with all respective parties to clarify the matter," Schenker said in a statement from Germany.

"In the meantime all the business of all our customers will be affected in a proper and compliant way and shipments will be executed timely and orderly as beforehand," the company said.

Gelfo, a spokesman at Schenker's parent, Deutsche Bahn, said traffic was "back to normal" after a disruption that lasted about 24 hours.
But the glitch was particularly embarrassing as Schenker had been named in December by the Beijing Organizing Committee for the Games of the XXIX Olympiad as the "Official Freight Forwarding and Customs Clearance Exclusive Supplier of the Beijing 2008 Olympic Games."
Schenker China Ltd., is registered in Shanghai, and has branches in Ningbo, Xiamen and Guangzhou.

Earlier this week representatives from the U.S. asked U.S. regulators within the Federal Maritime Commission, Maritime Administration and State Department to encourage China to delay its enforcement of a registration policy for NVOs for at least 60 days.

NVOs in the U.S.-China trades complain that the registration process is cumbersome and confusing. To apply, the U.S. NVO must first appoint a liaison entity that will represent its administrative and legal requirements before the Chinese government. The liaison may be a subsidiary or representative office of the U.S. NVO in China or a Chinese entity.

Numerous documents are also required to fulfill the registration process. They include:
* Application form (available through Chinese Ministry of Communications).
* Feasibility study report, which includes a general introduction and basic business analysis.
* Notarized certificate of incorporation and U.S. Federal Maritime License number.
* Sample bill of lading form.
* Introduction of the Chinese liaison.
* Power of attorney for designating the Chinese liaison.
* Contract between the Chinese liaison and the applicant.
* Business license of the Chinese liaison.
* Evidence of financial responsibility in the total amount of RMB 800,000 ($96,000), and RMB 200,000 for each branch office operated in China.